BNUMBER:  B-278371 
DATE:  January 20, 1998
TITLE: Hardcore DuPont Composites, L.L.C., B-278371, January 20,
1998
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Matter of:Hardcore DuPont Composites, L.L.C.

File:     B-278371

Date:January 20, 1998

David G. Obarski for the protester.
Lester Edelman, Esq., and Brian Kennedy, Esq., Department of the Army, 
for the agency.
Adam Vodraska, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Contracting agency's determination that small business set-aside offer 
is reasonably priced is legally unobjectionable where it was based on 
the agency's comparison of proposed prices received in response to the 
solicitation, including the price submitted by the protester; while 
the protester reduced its price following its disqualification as a 
small business, the award price was lower than the protester's initial 
offer.

DECISION

Hardcore DuPont Composites, L.L.C. protests the award of a firm, 
fixed-price contract to Lancaster Composites, Inc. under request for 
proposals (RFP) No. DACW39-97-R-0038, a total small business 
set-aside, issued by the U.S. Army Corps of Engineers, Waterways 
Experiment Station, for a composite fender pile system to be installed 
on both sides of a channel under the Lake Pontchartrain causeway 
bridge in Louisiana.  The system is being procured in support of an 
intergovernmental agreement between the agency and the Greater New 
Orleans Expressway Commission.[1]

We deny the protest.

The Corps received six proposals, including Hardcore's and 
Lancaster's.  As a result of the ensuing technical evaluation, 
Hardcore's proposal, which was rated highest and offered the lowest 
price, was included in the competitive range, along with two other 
acceptable proposals, including Lancaster's.  In considering Hardcore 
for award, the contracting officer sought a size determination from 
the Small Business Administration (SBA) regarding Hardcore's status as 
a small business.  SBA determined that Hardcore did not qualify as a 
small business for purposes of the procurement and the Corps did not 
further consider that firm's proposal for award.

The contracting officer proceeded to conduct discussions with the 
remaining eligible offerors in the competitive range, including 
Lancaster.  Hardcore referenced these discussions in an unsolicited 
letter to the contracting officer in which Hardcore revised its 
overall price downwards from its initial proposal price of 
$1,313,496.42 to $1,134,462.42 "to provide the Army Corps the greatest 
value and ability to determine 'fair market value' without a formal 
government estimate."  Following receipt of best and final offers from 
the remaining offerors, the Corps determined that Lancaster's proposal 
was the most advantageous to the government and awarded the contract 
to Lancaster at a price of $1,298,984.48.

Hardcore essentially contends that the contract was not awarded to 
Lancaster under the set-aside at a fair market price and that the 
set-aside should be withdrawn.  In this regard, Hardcore argues that, 
in the absence of a government estimate, the contracting officer 
failed to properly perform the required price analysis by failing to 
give any weight to Hardcore's reduced price as a reliable indicator of 
fair market price.  According to Hardcore, its revised price is 14.5 
percent lower than Lancaster's price, and this difference is amplified 
by the technical superiority of Hardcore's system.  Hardcore seeks 
resolicitation of the requirement on an unrestricted basis.

Under Federal Acquisition Regulation (FAR)  sec.  19.506(a), a contracting 
officer may withdraw a set-aside before award if he or she determines 
that award to a small business concern would be detrimental to the 
public interest because, for example, the award would be at more than 
fair market price.  The contracting officer has discretion to 
determine price reasonableness in a small business or other set-aside, 
and we will not disturb such a determination unless it is 
unreasonable.  A. Hirsh, Inc., B-271829, July 26, 1996, 96-2 CPD  para.  55 
at 2.  In making a determination of price reasonableness in this 
context, the contracting officer may, among other things, perform a 
comparison of proposed prices received in response to the 
solicitation, including prices submitted by an otherwise ineligible 
large business.  Id.; FAR  sec.  19.202-6(a), 15.805-2 (June 1997).

However, in view of the congressional policy favoring small 
businesses, contracts may be awarded under small business set-aside 
procedures to small business firms at premium prices, so long as those 
prices are not unreasonable.  Vitronics, Inc.,
69 Comp. Gen. 170, 171 (1990), 90-1 CPD  para.  57 at 2, aff'd, B-237249.2, 
90-1 CPD  para.  391.  In this regard, we have noted that a small business 
bidder's price is not unreasonable merely because it is greater than 
the price of an ineligible large bidder, since there is a range over 
and above the price submitted by the large business that may be 
considered reasonable in a set-aside situation.  The determination of 
whether a particular small business price premium is unreasonable 
depends upon the circumstances of each case.  See, e.g., Advanced 
Constr., Inc., B-218554, May 22, 1985, 85-1 CPD  para.  587 at 2 
(contracting officer in a set-aside procurement properly found 
reasonable a small business bid which was more than 11 percent higher 
than large business courtesy bid); Browning-Ferris Indus., B-209234, 
Mar. 29, 1983, 83-1 CPD  para.  323 at 2-3 (small business bid which was 51 
percent higher than large business bid was properly found reasonable);  
CDI Marine Co., B-188905, Nov. 15, 1977, 77-2 CPD  para.  367 at 2-3 (small 
business offer which was 17 percent higher than that of other 
qualified firms, large and small business alike, was properly found 
reasonable).

Here, the Corps awarded the contract to a small business at an amount 
less than Hardcore itself initially offered.[2]  Consequently, to 
conclude that the award price exceeds fair market value would be 
tantamount to concluding that Hardcore's initial offer reflected an 
attempt to secure that contract at substantially more that a fair 
price (in later reducing its price, Hardcore did not suggest any 
technical changes to its proposal).  We are unwilling to do so.  
Rather, we see nothing improper in the agency judging the 
reasonableness of Lancaster's price by comparing it to that of the 
other offerors, including Hardcore's initial offer, as the agency 
states it did in making its determination of fair market price.

The record shows that the agency considered Lancaster's price 
reasonable based on the competitive nature of the procurement and the 
state-of-the-art nature of the materials used in the pilot system.  
The agency contends that Lancaster's price reasonableness is further 
evidenced by the company's competitive published price lists and its 
similar pricing rates in previous contracts with other agencies and 
private firms.  Although Hardcore argues that the agency failed to 
consider significant installation costs associated with Lancaster's 
system, we think the agency properly did not consider such 
installation costs in its price analysis because, notwithstanding that 
offerors' approaches to installation were considered in the technical 
evaluation, installation was not separately priced or listed as a 
price-related factor, and will be performed under a separate 
construction contract with the Greater New Orleans Expressway 
Commission.

Based upon our review of the record, we cannot say that the agency's 
determination that the awardee's price was a fair market price was 
unreasonable.  

The protest is denied.

Comptroller General
of the United States

1. The RFP specifies that the fender piles shall be composed 
substantially of fiber reinforced polymer composite materials to 
protect bridge piers along the channel, and will replace an existing 
timber pile system with one more suitable for the lake's environment 
in terms of structural and material performance, longevity, and 
environmental protection.  Although the successful offeror under this 
RFP will provide all necessary structural elements, other system 
components, and connectors that constitute a fully functional fender 
pile system, the actual removal of the existing fender system and 
installation of the new system will be accomplished under a separate 
construction contract with the Commission. 

2. Moreover, as admitted by Hardcore, its prices do not include the 
complete system or the cost of filling hollow piles with concrete, 
whereas Lancaster's price did.  While Hardcore disputes the agency's 
calculations as to the impact of this omission, it concedes that 
$68,000 for the concrete should be added to its prices and that more 
piles will be required than it proposed.